Is Non compete agreement valid in India ?

680 votes

Your question seems to be vague. But still I will try to answer you.
A non compete clause is for such situation wherein an employee is in such position that he can learn every nitty gritty of the business domain and can go on to compete in that domain with current players. It is there to stop the breach of IPR rights.
Further non compete clause is also there at employee-employee level wherein you are being stopped from joining one organization from another. This is done so to protect the business ethics and to keep control on the internal information of the company.
Last one is again on employer-employee basis wherein you are stopped from joining the client company. This too is for protecting the internal secrets, IPR rights and business ethics.
All these are valid and can run for a certain period of time. In your case it is 4 years.

Advocate Pulkit Prakash LawRato

714 votes

1) non compete agreements cannot be legally enforced .

2) it would be restraint of trade and void under section 27 of indian contract act .

3)the Bombay High Court held that a restraint
operating after termination of the contract to secure freedom from competition from a person who no longer worked within the contract, was void. The court refused to enforce the negative covenant and held that, even if such a covenant
was valid under German law, it could not be enforced in India. (Taprogge
Gesellschaft MBH v. IAEC India Ltd., AIR 1988 Bom 157)

Advocate Prerna Jain LawRato

899 votes

As Indian Courts have refused to enforce post-termination non-compete clauses in employment contracts, viewing them as violative of Section 27 of the Indian Contract Act, as being in “restraint of trade”. You can not do so. Also, A 30 to 90-day notice period applies in order to terminate ‘workmen’ (as defined in the Industrial Disputes Act, 1947) – that is, employees whose role is not primarily supervisory, administrative or managerial) for convenience, with 15 days’ pay due for every year worked. In the case of manufacturing units, plantations and mines with 100 or more workmen, termination for convenience requires government approval; in other sectors, it requires only government notification.
Termination for cause does not include non-performance – it includes only behaviour which qualifies as misconduct.
The ‘last in, first out’ principle requires that the employer first terminate for convenience the last people to join the organisation in the same role. However, this requirement can be contracted out of. When hiring for the same role, workmen who were terminated for convenience should be given the opportunity to re-join the company.
State laws generally provide for about 15 days of earned/regular leave a year. Employees also benefit from up to 10 days of sick leave and a possible 10 additional days of ‘casual leave’. This is generally more than what most organisations would ideally like to provide.
Most state laws provide for ‘casual leave’ – the employee can opt not to come to work that day without applying for leave in advance. Many organisations find this disruptive.
Most state laws restrict women from working at night; if women are to work at night, specific approval must be obtained. Further, the employer must offer door-to-door transport and meet some security-related requirements.
Most state laws prescribe overtime for any hours worked beyond 48 hours in a week. However, this is seldom observed.
Indian law regulates and in some cases prohibits the use of contract workers. To engage contract workers, the contractor must hold a licence and the employer must be registered as a ‘principal employer’.
Non-compete agreements are not enforceable under Indian law, while non-solicitation clauses can be enforced only in limited ways.

Advocate Siddhant Sharma LawRato